Fidelity Seeks Magellan Shift

Published: January 5, 2000

BOSTON, Jan. 4—
Fidelity Investments Inc. plans to ask holders of its Magellan Fund, the world's largest mutual fund, to allow it to expand its investment options and put as much as 25 percent of its assets in one company.

Fidelity, a unit of the FMR Corporation, disclosed the plan in a preliminary filing with the Securities and Exchange Commission.

The five million account-holders in the $106 billion fund will vote on the proposal at a special shareholders meeting on April 19 -- the first such gathering since 1994. Shareholders will receive details of the proposal next month.

The Magellan Fund is now limited to placing no more than 5 percent of assets in any stock holding to protect investors through diversification.

Eric Kobren, executive editor of Fidelity Insight, a newsletter for Fidelity investors, said that it was extremely unlikely Magellan would ever put a quarter of its assets into a single company.

All of Fidelity's 35 other domestic growth funds already have the 25 percent investment strategy in place -- either voted in by shareholders or included from a fund's inception. None, however, has put 25 percent of assets in any one stock to date.

Magellan, which finished up 24.05 percent for 1999, is the last of the funds to be changed, Mr. Kobren said.

Under federal law, a mutual fund firm is bound by what is in its prospectus, and a violation can lead to a lawsuit. The greater the flexibility in the prospectus, Mr. Kobren said, the less likely any litigation.